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Pharmaceuticals special report: Price rules patently unfair to the poor

EVERYONE in Europe has friends and relatives who would not be with us, or who would have lived a shorter life, were it not for the medical and now biotechnological innovations brought to us over the years by the drugs multinationals. Yet at the same time, these are companies which more than any other, tobacco included, have become pariahs on the international stage.

The crisis of access to medicines in sub-Saharan Africa, Latin America and south-east Asia has put the drugs companies firmly in the public spotlight. The industry undoubtedly yearns for a return to an era when its business practices across the world were immune from public scrutiny. Those days, however, have now long since passed, and thankfully – if only they realised it.

On the altar of public opinion, the campaigning prowess of non-governmental organisations such as Oxfam and Médecins sans Frontières has demonstrated conclusively the extent to which the drug giants have consistently put corporate profits before public health in poor countries.

Even John Le Carré has joined the critics of the drugs companies’ behaviour in the developing world, in his novel The Constant Gardener.

In popular opinion the pharmaceutical industry bears the greatest proportion of the blame for the appalling crisis of access to medicines in the developing world, particularly as it applies to HIV/AIDS, tuberculosis and malaria. In reality, the truth is far more complex.

There are low limits of credibility for the arguments of the highly-profitable pharmaceutical industry in the face of such a human tragedy, as it concentrates the blame on poor healthcare infrastructure in the developing countries.

This is part of the explanation but another must be the industry’s failure to develop strategies that promote access to medicines for the poor.

Some companies are now responding, each differently, to the crisis of access to medicines and the public outrage over their failure to respond sufficiently seriously. A case of too little, too late, many would say.

Pfizer adamantly refuses to consider little more than further philanthropy; GlaxoSmithKline (GSK) has gone furthest in publicly acknowledging that its prices were previously far too high in poor countries; while Bristol Myers Squibb (and GSK) have started to allow their lucrative patents to be used, in a strictly limited fashion, by developing country manufacturers to produce local generic versions of their original, expensive medicines.

Surprisingly, the global pharmaceutical firms have often relegated the pricing of medicines to local, and usually quite rudimentary, decision.

Managers of local subsidiaries in developing countries have been left free to pursue a strategy based on charging high prices to a wealthy elite, in order to achieve revenue targets.

This is commercial behaviour more akin to the colonial era than what is expected of companies in today’s world. The result is that the disadvantaged, the dispossessed and the poor have little chance of access to medicines.

As the world now knows, millions have gone untreated as a result. Having allowed the pressure of public disapproval to build to such a level, a dark shadow has now been cast over the industry’s claims to a strong, global regime of intellectual property rights.

Ultimately, patent rules are a form of contract with society, balancing innovation with reward. But access to innovation is also a part of the equation – and a part which seems to have been forgotten by the pharmaceutical companies. In this sector patent rights inevitably also carry social responsibilities.

The patent system has provided a safeguard for drug firms against the possibility of other, cheaper, generic drugs undercutting their high prices, while the pressure for business paradigms that promote high volume sales at massively reduced prices has simply not existed.

The attention of governments, aid agencies and industry is now focusing intensely on the global patent regime known as trade-related intellectual property rights (TRIPs), particularly in the wake of the current anthrax alert. The Canadian government decided last week to override German group Bayer’s patent on anti-anthrax drug Cipro and licensed a local company to produce copies of it. Ottawa was forced into a U-turn on Tuesday amid the threat of legal action.

TRIPs were already high on the agenda as the international community gears up for the next World Trade Organisation (WTO) ministerial meeting and the expected launch of a new round of global trade talks. Movement on TRIPs is seen by many developing countries as a precondition for the new round.

And developing countries, the European Commission and the United States are each tabling proposals and counter proposals, seeking to negotiate a way out of the strictures of the TRIPs agreement which so hinder access to medicines by poor countries. As the Commission’s director-general for trade remarked in July, “a truly substantial declaration” on trade, health and access to medicines is needed at the next WTO ministerial meeting.

The developing countries have made modest proposals which would allow them to use the existing flexibility in the TRIPs agreement, without risk of legal pressure (such as that used by the drug firms against South Africa) or trade sanctions (used so effectively over the years by the US).

These developing country proposals stop far short of root and branch reform of the global intellectual property rules. They do not suggest re-writing the TRIPs agreement, nor removing it from the auspices of the WTO altogether.

However, having not learned their lesson from the global disapproval of their behaviour in poor countries over the last few years, the pharmaceutical companies are even now urging the United States government, and some EU member states, still to resist any change.

It is difficult to understand why the pharmaceutical industry continues so enthusiastically to protect the status quo (which clearly is no longer acceptable, particularly considering the human suffering it entails), and to risk the backlash against it that will undoubtedly follow so forceful and narrow an interpretation of its self-interest.

If reasonable reform and clarification of the global patent rules is rejected as a result of industry lobbying, then the TRIPs agreement is going to be brought even further into disrepute.

This in turn could reduce the chances of consensus over a new round of trade talks and the public image of the WTO will suffer further damage. Failure to agree a substantive and meaningful interpretation of TRIPs can only hasten its full review, including whether medicines retain the same status within patent rules as other products, and the appropriateness of TRIPs being part of the WTO.

Presumably, the pharmaceutical companies would not welcome such a development – yet this is precisely the direction in which their actions are leading them. The continuing failure of the pharmaceutical companies to be responsible, strategic, or even slightly creative, is already leading many observers to ask whether there might be no other alternative in the near future but to recognise definitively the inherent failings of the global patent system as it relates to medicines, and to seek out full reform as soon as possible.

It is of course ironic that the drug firms run these risks without registering that the developing countries provide only a tiny fraction of their global revenues. It would surely be a more astute response to acknowledge wholeheartedly that today the corporate social responsibility expected of companies limits the use of patent rights in the global community and also creates an imperative for change in the way business is conducted and public policy articulated.

David Earnshaw runs the Brussels office of Oxfam International. He was previously head of SmithKline Beecham’s (now GlaxoSmithKline) office in the Belgian capital. Until 1993 he worked with the chair of the European Parliament’s environment and health committee, where he was “on the receiving end of much pharmaceutical industry lobbying”.